Environmental social and governance reporting guide for Hong Kong companies
Environmental, social, and governance reporting guide (ESG) for Hong Kong companies
Question 1 (45 marks)
Blueberry Holdings Limited (‘the Company’) is a company incorporated in Hong Kong and listed on the Main Board of the Hong Kong Stock
Exchange. To strengthen the overall corporate governance of the Hong Kong , the board of directors has resolved to carry out a five-year strategic plan. One initiative of the plan is to increase the representation of independent directors in the board of Company. As a result, Mr. David Lu was appointed as a new independent non-executive director of the Company and an announcement in respect of the appointment was published recently. Currently, the Company does not have an in-house internal audit function. This function is outsourced to a professional firm. As a move in the five-year strategic plan, the Company plans to set up an in-house internal audit team to perform the function. David’s first task is to advise
the board on the matter after joining the Board. Another key initiative under the five-year strategic plan is to set up a nomination committee. For the past years the board of directors has 12 CGV B898 Issues in Corporate Governance collectively undertaken the nomination function. As the company grows, the board sees the merit of delegating this function to a specific committee with the necessary expertise and formulate a nomination policy.
At the time of his appointment as the company director, David was already holding five million shares of the Company. To avoid the trouble of disclosure, David planned to dispose of the shares immediately after his appointment. Therefore he did not disclose the facts to the company
but confirmed with the Company that the information stated in the announcement was correct. However, David was so busy that he forgot to
follow up the matter after his appointment. He continues to hold the shares.
Answer the following questions:
a. Apart from fulfilling the independence requirements set out in the Listing Rules, what factors should the board of the Company take into consideration when assessing the suitability of an independent non-execution director candidate? (10 marks)
b. Outline the key contents of the nomination policy that are suitable for the situation of Blueberry Holdings Limited. (10 marks)
c. To assist David in advising the board relating to the in-house internal audit team, you are required to distinguish the roles of external auditors and internal auditors, and their relationship with the audit committee. (10 marks)
d. Advise David on the possible consequences of his failure to disclose his shareholding in the Company. Specify the regulators to be involved. (15 marks)
Question 2 (25 marks)
Your Unit 1 course material states that ‘family governance issues are a very important feature of many of Hong Kong’s largest companies. Additionally, a large number of state-owned companies in mainland China are listed in Hong Kong. Both groups of companies have unique
corporate governance issues.’ Having studied the first five course units, you should have a better understanding of the corporate governance issues of companies in the two markets. Discuss what unique Is it free market or regulated financial systems that underpin long-term economic success and effective corporate governance issues the author
is referring to.
Question 3 (30 marks)
In the section headed ‘A framework for corporate control’ of Unit 6, the author says: In the past, the ESG reporting requirement caused some Hong Kong listed companies considerable concern as they were unsure of the Assignment File 13 extent of their obligations under the old reporting guide. With the revised ESG Guide and better defined Subject Areas, Aspects, General Disclosures and KPIs provided therein, it is likely that these teething problems will be overcome once two or three reporting cycles have been completed.
Critically evaluate this statement by discussing:
a. how the revised ESG Guide helps mitigate the listed issuers’ concern; and (15 marks)
b. whether you agree that the ‘teething problems will be overcome once two or three reporting cycles have been completed’. State and elaborate your view. (15 marks)
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